ML19323A046

Annual Financial Rept 1979

ML19323A046
Person / Time
Site:	Peach Bottom
Issue date:	02/15/1980
From:	DELMARVA POWER & LIGHT CO.
To:
Shared Package
ML19323A042	List: ML19323A041 ML19323A043 ML19323A044 ML19323A045 ML19323A046
References
NUDOCS 8004150260
Download: ML19323A046 (32)

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Service territory The Delmarva Pminsula is our home. As depicted on the cover, we supply much of the energy for the people living, working, and playing on 5,700 square miles of both urban and rural land stretching from the industrialized Wil-i i

mington area in the Northeast Corridor to the farmland of Delaware, Maryland, and Virginia and surrounded by the beayty of the Atlantic Ocean and the Chesapeake Bay.

Js Business rE ',

Our 2,500 ernployees supply electricity 4

i to 272,000 customers on most of the "t

N peninsula and natural gas to 72,000 3

customers around Wilmington. Corpo-p w u

l rate goals are to provide safe, reliable

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l electric and gas service to all customers at the lowest possible cost and impact on the environment, to generate attrac-

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tive earnings to stockholders, and to j

satisfy the needs of our employees.

j Facilities N

i We supply electricity with 2,047 mega-watts of generation capacity 1,300 miles of transmission lines and 8,400 i

miles of distnbution lines. We supply natural gas to the Wilmington area with 1,000 miles of gas main.

Cover luustration by C. Philhp Wikoff. Corporate l

Comrnunications Department.

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Financial Highlights Percent increase 1979 1978 (Decrease)

Revenues

$424.7 million

$378.7 million 12.1 Net income

$ 53.4 million

$ 47.4 million 12.5 Earnings Per Share

$ 1.91

$ 1.85 3.2 Dividends Declared 1.40W

$ 1.30W 7.7 Common Stock Outstanding (Average Shares) 23.214.603 21,581,575 7.6 Common Stock Book Value

$ 15 87

$ 15.77 0.6 Construction Expenditures

$112.1 million

$130.3 million (14.0)

Financings

$ 98.9 million S 75 3 million 31.3 Electric Sales 7.49 bilhon kwh 7.25 billion kwh 3.4 Electric Customers (Average) 269,497 266,042 1.3 Average Residential Usage 8.188 kwh 8,406 kwh (2.6) 4 Gas Sales 13.96 milhon mcf 13.17 million mcf 6.0 Gas Customers (Average) 71.239 71.416 (0.2)

Average Residential Usage 95.3 mcf 102.8 mcf (7.3)

• Quarterly dividends increased to 37 cents per share.

• Annual earnings increased to $1.91 per share.

• Rate redesign proposals were filed in Delaware and Maryland.

• The Maryland and Virginia subsidiaries were merged into the parent Delmarva Power & Light Company.

• The price of oil increased by 89% over the year, causing a major impact on the company and its customers.

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Letter to stockholders The high price of energy is every-Since 1974, a strategic objec-February 15,1980 body's problem. Certainly, the price tive of the company has been to re-of oil this year had a majorimpact on duce dependence on oil. We are 4

i your company as well as on all of its accomplishing this by balancing our customers. Until this company and fuel mix, mainly switching to coal.

our nation can reduce this depen-Our plan is to reduce dependence dence on foreign oil, controlling on oil from 53% in 1979 to 29% by energy costs will be difficult, and our 1981 through the addition of a 400 nation's foreign policy options will megawatt coal-fired generator at be limited.

Indian River in the fall of 1980 and Therefore, we believe it is of the addition of 83 megawatts of ca-overriding importance for us to dis-pacity at the Salem 2 Nuclear Power cuss our plan for reducing the de-Station. This dependence will be re-pendence on oil and to seek the ac-duced further to 19% in 1982' tive support of our customers and through the conversiontocoalof two

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regulators to implement this plan.

oil-fired units at the Edge Moor Crucial componer ts of this plan in-Power Station.

clude prompt and reasonable rate As these coal and nuclear relief during 1980 and continued plants begin operation, we expect i

4 confidence of investors to provide reductions in the rate at which fuel ca(.' to pay for the non-oil-using costs rise since we expect, in the

. facilities needed to provide reliable near future, the price of coal and j

electric service while minimizing uranium to rise at a slower rate than future costs for the people of the the price-of. oil. ~ Offsetting this in j

Delmarva Peninsula.

1980, we will be asking the regula-During 1979, approximately 42 tory ' agencies in Delaware, Mary-cents out o' every dollar received land, and Virginia and the Federal went to tny our raw material-fuel.

Energy Regulatory Commission for Mostof that moneywentto payforoil rate hikes to begin to pay for this i

which produced 53% of the electric-

~ non-oil-fired generation capacity.

ity we sold.The price of oil bought by.

In addition to balancing our fuel Delmarva Power this year has in-mix, we plan to reduce this depen-creased 89%.Thus,the priceof oilis dence on oil by encouraging the e

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critical to our price of electricity.

wise use of energy. A new rate de--

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l N M. Curtis and R. D. We:mer Prva AcNo Priuto sign prcposed by the company of-prices doubling with some question tomers at reasonable costs.

fers incentives for business and in-of supply, a nuclear incident casting Thus. in the year 1979,although dustry to reduce on-peak energy shadows over all electric utilities earnings increased only modestly use and take advantage of lower whether dependent on nuclear and operations were imV 'ed sub-off-peak nighttime and weekend power or not, and the threat of re-stantially by the high price of oil, rates. Delmarva Power's marketing cession - we are pleased to report Delmarva Power progressed toward efforts during the 1980's will be di-an increase in earnings to S1.91 per the crucial objectives of reoucing rected toward providing printed share from $1.85 per share in 1978.

the dependence on oil and improv-materials, seminars, and energy This is on target with expectations.

ing the financial stability of the com-audits to help customers manage in December, the Board of Di-pany. We appreciate the hard work, their use of energy. Research rectors increased dividends, indi-loyalty, and understanding of our projects are directed toward devel-cating confidence in the perfor-employees, which have enabled us oping the tools for using energy mance of the company.

to make this progress.

during off-peak hours. These Progress was made in the man-1980 will be a pivotal year for projects will have the effect of utiliz-agement of the company with the the company, largely dependent on ing more fully the company's most completion of the merger of the prompt and reasonable rate relief.

etficient generating units.

Maryland and Virginia subsidiaries We intend to work as a team utilizing l

We believe this continuing into the parent company; the com-the skills of all employees to meet l commitment toward reducing our pletion of a staff reorganization for the new decade of challenges and dependence on oil will lead to both greater efficiency; the development opportunities.

more predictable costs to our con-and installation of new automated sumers and increased financial sta-in-house programs; the on-bility of the company in the coming schedule construction progress on decade.

the coal-fired unit at Indian River; the J44 Progress on this path was made opening of a new Northern Division Robert D. Weimer in 1979. The financial stability of the headquarters and system oper-Chairman of the Board &

company has improved. By tradi-ations facility at Christiana; and in' Chief Executive Officer tional standards of financial mea-creased performance of our em-surement, the year may be called ployees.

' one of moderate growth. However, These programs are designed considering the severe external to position Delmarva Power for the Nevius M. Curtis pressures on your company during 1980,s with a strong, flexible profes-President &

1979 - a year-long inflation rate of sional organization dedicated to Chief Operating Officer 13% a capital market in disarray, oil providing reliable service to cus-3 a

l Energy to the people Delmarva Power & Light Company pro-DP&L beli_ eves that the nation's nuclear l

of the peninsula vides electricity to a diverse service ter-option should remain open to achieve a

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ritory including the industrialized area balanced program of energy indepen-around Wilmington, Delaware, the tour-dence. The company will not construct ist and recreation areas on the Atlantic nuclear generation until more assur-Coast, and the commercial and rural ance is given by the federal government I

areas of the Eastern Shore of Maryland that major problems such as waste dis-and Virginia and lower Delaware.

posal and fuel reprocessing are sc'ved.

Delmarva Power projects a moder-In a related move to reduce further ate-3% to 4%-growth ratein kilowatt the dependence on oil, Delmarva Power hour sales through the early 1980's. To sought and received approval to make continue to provide reliable service to available 850 million cubic feet of nat-the Delmarva Peninsula and to accom-ural gas and took on new natural gas modate this growth, Delmarva Power customers for the first time since 1971.

has strengthened several programs to control prices, improve service, and en-courage the wise use of energy.

Energy management Balanced fuel mix Energy costs to customers can also be controlled through the wise use of the Delmarva Power, along with the rest of energy that is now availab!e. In re-this nation, must red ice its dependence sponse to customers' needs, Delmarva on foreign oil. The price of oil purchased Power is intensifying its efforts to en-by the company in 1979 for use at the courage customers to use energy more Edge Moor Power Plant increased 89%

efficiently.

from $14.20 per barrel in January to New rate designs proposed by the

$26.90 per barrel in December, causing company offer incentives for business filings to the Delaware, Maryland, and and industry to reduce on-peak energy Virginia regulatory agencies for sub-use and to take advantage of lower cost i

stantial increases in the fuel charges.

off-peak nighttime and weekend rates.

As outlined in the letter to stock-These rates will help customers control

.olders, the company is working to bal-energy costs. They also have the poten-ance its fuel mix and reduce its depen-tial of utilizing more fully the company's denceon oilfrom S3%in 1979to29% by most efficient generating units and of 1981 through the completion of a 400-minimizing the need to build more costly l

megawatt coal-fired plant at Indian generating capacity in the future.

1 Fuel Cost River in 1980, the retirement of three In order to help commercial and in-l oil-fired units at Vienna Power Plant, and dustrial customers with their energy

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Cents per MBTU the addition of 83 megawatts of genera-management, the company's marketing l

tion capacity from the Salem 2 Nuclear department offers various services in-400 j

Power Station under construction in cluding printed materials, seminars, I

southem New Jersey.

special publications, and specialized 320 In addition, Delmarva Power plans energy management courses. Cus-to reduce this dependence on oil to 19%

tomer commitment and participation is in 1982 by converting to coal two oil-the key to success in this area.

i 240 or fired units at the Edge Moor Power Sta-Residential customers have bene-tion and to 14% in 1988 by building a fited from the company's Energy Effi-l large coal-fired plant at Vienna, Mary-ciency Award program which encour-j Co land.

ages thermal efficiency in new home 160 fat As these new and converted power construction. More than 26,000 res-plants begin operations', the company idents of Delmarva Peninsula have re-Nuclear -

expects a decrease in the rate at which ceived energy conservation tips 80 f

fuel costs rise.

through Project Conserve, a com-While coalis envisioned as the fuel puterized home energy audit which also l

75 76 77 78.79 for the new power plants of the 1980's, promotes energy efficiency. Planning I

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.e O Nuclear D Od The contrast between the busy skyline of Wilmington, i

a Coal De! aware, and a solitary farmer indicates the diversity of Delmarva Power & Light Company's service territory. Del-marva Power provides much of the energy to the people of the De!marva Peninsu!a.

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Environmental protection and energy manage-

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l ment are important concepts to the people el the j

peninsula. Workmen for Delmarva Power (top) !ay a i

submarine power cable across the Assawoman Bay j

to help provide additional re!iable electnc service to j

the founst and recreation arca around Ocean City.

Maryland. chile not interfering with the esthetic l

beauty of the bay. Above. F. Larry Golt. (left) vice president for butid:ng management for the Concord P!aza Associates, shows Delmarva Power en-g:neers, Tim Smith (center) and Richard Garvine j

(right) the additional energy savings he has made at his Wimington office building through Delmarva j

Pcn.er's energy n.anagement action course.

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has begun for a more entensive energy include the installment payment of audit program to be conducted in cus-overdue bills; notification of a friend or tomer homes by company represen-relative of the intention to disconnect tatives.

service; budget billing; life-support and Looking to the future, the company medical emergency listing; the distri-is sponsoring research projects which bution of energy conservation infor-should help give customers the ability to mation; and referrals to social agencies take full advantage of lower cost off-which can help people with these prob-peak energy. Although most of Del-lems.

marva Power's research is conducted through the Electric Power Research in-Environmental considerations stitute. the company invests in several local research programs including a Delmarva Power appreciates the beauty project with chemists and engineers at of the Delmarva Peninsula and works the University of Delaware's Institute of hard to produce energy with minimal Energy Conversion to allow home. impact on the air and water.

owners to store the cold air generated During 1979, the company re-by air conditioners running at night for ceived $17.7 million from the sale of tax use during the heat of the next day and a exempt pollution control bonds through project with researchers at the Univer-the Delaware Department of Community sity of Maryland and the Delmarva Poul-Affairs and Economic Development to try Institute to encourage poultry farm-provide the funds for pollution control ers to use electricity at night for heat equipment at the Indian River and Edge instead of propane. Also, with Puolic Moor Power Stations needed to meet Service Commission approval, the both national and state water and air Company will offer 1,000 customers in quality standards. A key part of that pro-Delaware the opportunity to test new gram is an $8 million project to upgrade Construction residential rate designs which encour-precipitators to reduce stack emissions Expenditures age efficient energy use.

at indian River.

Including Delmarva Power realizes that en-Another program cornpleted this Environmental ergy costs are of crucial importance to year was the placing of a three mile the economic well-being of the penin-cable under the Assawoman Bay. This pollars in Malions sula. The company intends to continue willimprove the reliability of electric ser-160 providing customers the assistance and vice in the Ocean City, Maryland, area.

the options to better control these costs.

Delmarva Power is also participat-140 ing in the planning of the Merrill Creek 120 Customer services Reservoir in Harmony Township, New Jersey, which will provide additional 100 Delmarva Power works hard to avoid cooling water to utilities throughout the service disconnections. DP&L recog-Delaware Valley at times of low water 80 nizes both the potential danger of ser-flow on the Delaware River.

vice cutoffs to people and property of 60 the peninsula during the cold winter Stockholders season and the costto the company and 4g its stockholders of the termination and A key resource to Delmarva Power is its resumption of service. Therefore, the nearly 70,000 stockholders,14,000 of 20 company takes extra precautions to whom live on the Delmarva Peninsula.

avoid disconnections for nonpayment of These shareholders are part of the en-79 80 81 82 83 bills. Customers having difficulties in ergy solution for both the Delmarva L erogctedJ paying bills are encouraged to use sev-Peninsula and the nation because they 0 Environmental eral programs the company has devel-help provide the capital needed to sup-E Construction (Net of oped to help in hardship cases. These port these efforts.

Environmental) 7 a

1979 Financial review 1979 was a year of moderate financial tion, the delays in the nuclear power growth. Earnings applicable to common plants at Salem, New.'.ersey, and in-stock increased 10.9% to $44.3 million creases in fuel prices. However, the re-from $40.0 million. Earnings per share peal of the Pennsylvania Gross Receipt increased 3.2% to $1.91 from $1.85. The tax increased reported earnings in 1979 quarterly dividend was increased in De-(see Note 3 to financial statements).

cember to 37 cents per share from 341/2 cents per share. Coverage of Financing and capitalization fixed charges (SEC) increased to 2.86 times in 1979 from 2.79 times in 1978.

During 1979, the company continued The return on average common financing in the public market to provide Revenue by equity in 1979 increased to 11.9% from funds for its construction program. Total Operation for 1979 11.8% in 1978. This rate is still well construction requirements for the year below that found " fair and reasonable" amounted to $112.1 million and $98.9 by all of Delmarva Power's regulatory million of that was raised from external authorities.

sources. The company sold two million ELECTRIC 86%

Sales and revenues lion and received $17.7 million from the sale of 6.6% Series tax exempt pollution Electricity sales increased 3.4% over control bonds through the Delaware the previous year to 7.49 billion kwh.

Department of Community Aifairs and This growth was slightly less than antici-Economic Development. The bonds pated because of cooler summer and were sold to finance pollution control warmer winter weather than normal and equipment at the company's indian conservation. Residential sales de-River and Edge Moor Power Stations to NON UTILITY as creased 0.6% in 1979 to 1.97 billion meet both national and state water and kwh. However, this was more than offset air quality standards.

by a nearly 9% increase in industrial Because of the poor financial mar-demand.

kets, the ' company replaced the Electric operating revenues in-planned sale of first mortgage bonds Cost of Service creased 14.3% to $363.7 million in 1979, and preferred stock by obtaining a $50 for 1979 primarily due to rate increases which million five-year term loan. This loan became effective in late 1978, greater provides the company with flexibility to kwh sales and increases in fuel adjust-refinance any time during the five-year ment rates.

term without prepayment penalty.

Natural gas sales increased 6.0%

in addition to these three issues, the FUEL over 1978 to 14.0 million mcf. Delmarva company raised $6.0 million with the CAPITAL Pov.er began adding new customers for sale of 476 thousand shares of common 31%

the first time since 1971. Gas operating stock through the Dividend Reinvest-revenues of $49.3 million were approx-ment and Common Share Purchase imately the same as those of 1978.

Plan. The company established an In-LABOR vestment Tax Credit Employee Stock g

Operating expenses Ownership Plan (TRASOP) in 1979.

MATERIALS Under this plan, the company raised

& OTHER Despite the company's stringent pro-

$1.0 million in 1979 through the is-16 %

grams to control costs, operating and suance of 75 thousand shares of com-maintenance expenses' increased by mon stock.

15.7% during 1979 to $275.0 million.

t The increases are due mainly to infla-8

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78 79 80 81 82 T he key to rninimana costs for electDc Serv!CO is to er a F nancing E

dance on cJ for the genoratto: of e:ectncity. A ma,or coa!-

hrc>d unit (anove and tiehind the circular cocing tav.er) is m ar:n g c c: m o, at in e c o m p a n v s in d1a n m.,er pia nt nod! M:15 t E T O. CO!av.are De:n arva Porser's use of tne ra Nid > :nc!ud ng crossing the Chesapeake Bay to t] ring tl cM to the p! ant vdi have a substantial impact on the long-term preservat0n of ral service for the peninsula l

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Construction and capitai needs better utilization of facilities, streamlined Revenue by record keeping, and greater orga-Jurisdiction Capital needs peaked in 1978-1979 with nizational consistency.

the coal-fired Indian River 4 and the nu-clear Salem 2 nearing completion.

Rate matters i

Projected construction expendi-tures will decrease through 1982 before New rate design proposals were filed in DELAWARE beginning to rise in the mid 1980's. The Delaware which will reflect more ac-l planned decline in construction expen-curately the cost of service to each class

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ditures coupled with requested rate re-of customers. These new rates, if ap-lief will provide increased cash flow. In-proved, will cause some shifts in costs ternally generated cash as a percent of both between and within customer construction expenditores, which pro-classes. The rates also will be higher in vided about 35% of the funds needed summer than in winter and will include

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OTHER 4%

VIRGINIA 2%

for construction in the 1977-1979 incentives for off-peak usage.

period, will provide about 72% of the This proceeding in Delaware has cash for construction in the 1980 to 1982 drawn 12 active participants including period.

the State of Delaware and the Federal Department of Energy. A decision is ex-Organ.ization pected in mid 1980.

Also in Delaware, the Public Ser-Effective October 1,1979 Thomas C.

l Roe retired as Chairman of the Board of vice Commission approved an increase Directors. Mr. Roe served the company in the fuel adjustment charge which i

with distinction since 1936. For more went into effect in June and another in-l than 40 years, he held several key posi.

crease in January,1980, subject to re-tions in Delmarva Power's southern fund after formal proceedings in early subsidiaries. For the last three years, Mr.

1980. The Commission also approved i

Roe served as Delmarva Power's effective January 1,1980, an increase, Chairman during the time when the subject to refund, in the gas production I

southern subsidiaries were merged into charge.

i the parent company. He will continue as in Maryland, rate redesign pro-a director.

posals were filed similar to those in Del-i I

Robert D. Weimer was elected aware. Also, the company filed for a $7.6 I

Chairman of the Board of Directors. Mr.

miffion increase in revenues to recover Weimer, formerly president of the com.

higher operating and capital costs pany, will continue as Chief Executive caused by inflation and to make system l

Officer. Nevius M. Curtis was elected improvements. The company also re-President and Chief Operating Officer.

quested recovery of deferred fuel costs.

Howard E. Cosgrove was elected Vice In Virginia, the State Corporation President of Finance and Accounting, Commission has approved the re-and Chief Financial Officer, replacing quested increase in fuel adjustment Mr. Curtis. Charles Marchyshyn, for-charges, effective January 1,1980.

merly of West Penn Power Co., was The Federal Energy Regulatory named Comptroller.

Commission (FERC) approved set-tiements of a 1978 rate case between Merger the company and three electric cooperatives and five municipalities The stockholders approved the merger and has yet to act on a settlement pro-of the Maryland and Virginia sub-posal with another municipality. The

. sidiaries into the parent Delmarva Power settlements were for about 64% of what

& Light Company. The merger will lead was originally sought by the company.

to more efficient service to customers The case is still pending for six through improved cash management, municipalities.

I 11 t

a

i Management Review of Operations 13 Financial Contents Consolidated Statements of Income 15 J

Consolidated Balance Sheets 16 Consolidated Statements of Sources of Funds for Construction Expenditures 18 Consolidated Statements of Capitalization 19 Consolidated Statements of Changes in 1

Common Stockholders' Equity 20 Notes to Consolidated Financial Statements 21 Report of Independent Certified Public Accountants 29 Consolidated Statistics 30 Trustees First Mortgage and Collateral Trust Bonds, Chemical Bank, New York, NY.

Pollution Control Revenue Bonds, Farmers Bank of the State of Delaware, Wilmington, DE, and Bank of Delaware, Wilmington, DE.

Transfer Agents Preferred Stock - Wilmington Trust Company, Wilmington, DE.

Common Stock - Wilmington Trust Company, Wilmington, DE, and Irving Trust Company, New York, NY.

Registrars Preferred Stock - Delaware Trust Company, Wilmington, DE.

Common Stock - Delaware Trust Company, Wilmington, DE, and Irving Trust Company, New York, NY.

Stock Symbol Common Stock, DEW-listed on the New York and Philadelphia Stock Exchanges.

Regulatory Federal Energy Regulatory Commission,825 North Capital Street, N.E.,

Commissions Washington, D.C. 20426 Delaware Public Service Commission,1560 S. du Pont Highway, Dover, DE 19901 Maryland Public Service Commission, American Building,231 E. Baltimore St.,

Baltimore, MD 21202 Virginia State Corporation Commission, P.O. Box 1197, Richmond, VA 23209 Corporate Address Delmarva Power,800 King Street, P.O. Box 231, Wilmington, DE 19899.

Telephone (302) 429-3011 Annual Meeting Will be held on April 15,1980, at 12:30 p.m., in the Grand Ooera House,818 Market Street Mall, Wilmington, DE To supplement information in this Annual Report, a Financial and Statistical Review (1969-1979) and the Form 10-K are available upon request. Please write to Stockholder Relations, Delmarva Power,800 King Street, P.O. Box 231, Wilmington, DE 19899 Quarterly Common Stock Dividends and Price Ranges The company's common stock is listed on the New York and Philadelphia Stock Exchanges and has unlisted trading privileges on the Cincinnati, Midwest, and Pacific _ Stock Exchanges.

1979

-1978 Dividend Price Dividend Price -

Declared High Low Declared Hioh Low First Quarter

$.34W 14 %

12 %

First Ouarter

$.32 -

14 %

13%'

Second Quarter

.34W 13 %

12 %

Second Quarter

.32 14 %

13%

Third Quarter

.34W 14 12 %

Third Quarter

.32 14% ~

13 %

Fourth Quarter

.37 13 %

11 %

Fourth Quarter

.34W 14 %

12%

12 u

Dalmarva Power & Light Company and Subsidiary Companies Management Review of Operations Consohdated Summary of Earnings For the years ended December 31 (Dollars in Thousands) 1979 1978 1977 1976 1975 Operating Revenues Electric

$363,666

$318,106

$291,568

$242,279 $239,355 Gas 49,322 49,640 36,233 32,248 25,673 Steam 11111 10,956 10.017 11,861 10,998 424,699 378,702 337,818 286,388 276,026 Operating Expenses Operat:on 246,547 212,498 198,020 167,215 165,165 Maintenance 28,475 25,214 24,989 21,596 17,769 Depreciation 33,866 31,383 28,046 25,367 24,579 Taxes 40.952 38,044 24,736 17,857 16,689 349,840 307,139 275,791 232,035 224,202 Operating income Electric 69,503 66,257 57,438 49,281 48,516 Gas 4,425 4,381 3,666 4,152 2,394 Steam 931 925 923 920 914 74,859 71,563 62,027 54,353 51,824 Other income 12,670 8,044 8,069 8,519 6,203

~~

Income Before Interest Charges 87$529 79,607 70,096 62,872 58,027 Interest Charges 34,153 32,159 30,768 26,437 26,488 Net income 53,376 47,448 39,328 36,435 31,539 Dividends on Preferred Stock 9.050 7,474 7,250 7,250 7,250 Earnings Applicable to Common Stock 44.326 39,974 32,078 29,185 24,289 Dividends on l

Common Stock 33,124 28,189 24,127 22,618 21,107 Addition to Retained Earnings

$ 11202

$ 11,785 5 7,951

$ 6,567

$ 3,182 Common Stock Average shares i

outstanding (thousands) 23,215 21,582 19,403 18,821 17,580 Earnings per share

$1.91

$1.85

$1.65

$1.55

$1.38 Dividends declared per share

$1.40W

$1.30W

$1.22

$1.20

$1.20 i

l 13 1

=h%

Management's Review of Operations, Continued Operating Revenues Operating revenues were up 12.1% in 1979 and 1978 primarily because of the following:

Revenue increase (decrease) frorn the Prior Year (in rnillions)

Cause 1979 1978 Electric Changes in Base rates due to rate increases

$11.8

$17.6 Sales 5.9 8.6 -

Recovery of fuel costs 28.5

( 1.4)

Other electric revenues (0.6) 1.8 Gas

-$45.6

$26.6.

Changes in Base rates due to rate increase

$ 3.0 Sales (0.1) 1.9 Recovery of purchased gas costs (0.2) 8.5

_$R3)

$13.4 Electric sales increased 3.4% in 1979. reflecting increased usage by the industrial class of customers, and 5.0% in 1978 as usage increased by all classes of customers. Although total gas sales increaseo 6.0% in 1979 due to an increase in the availability of gas which was sold to the industrial-interruptible and seasonal off-peak customers, gas revenues decreased l

$0.1 million due largely to a decrease in sales to residential and commercial customers as a result of fewer heating degree days. The increase in 1978 sales is primarily due to increased usage by commercial and industrial classes of customers.

Operation and Maintenance Operation (which includes fuel, energy interchange, gas pu; chased and other operation costs) and maintenance expenses increased $37.3 million and $14.7 million during the year 1979 and 1978, respectively. The increase in 1979 reflects higher fuel costs, primarily oil. The larger expenses in 1978 resulted from increased costs of gas purchased and greater generation of electricity which was partially offset by an increase in interchange sales to the PJM pool as a result of the coal strike in early 1978.

Taxes-Taxes on income in 1979 increased due to higher pre-tax operating income which was partially offset by a reduction in the statutory tax rate from 48% to 46%. The increase in 1978 is.

primarily due to higher pre-tax operating income which was generated by the rate increases placed into effect. Taxes other than income decreased in 1979 due to the reversal of the

' Pennsylvania gross receipts tax (see Note 3 to the financial statements).

Other income Other income increased in 1979 due mainly to an increase in the AFUDC rate, semi-annual compounding of AFUDC and increased construction expenditures at Indian River power plant.

Interest Charges Interest charges increased in each of the comparable years due to an increase in long-term debt through the sale of first mortgage bonds in 1979 and 1978. Short-term debt interest

- expense also increased as a result of higher interest rates incurred by the company in - )

providing interim financing for its operations.

Earnings Applicable to Common Stock.

Earnings applicable to common stock and earnings per share increased 10.9% and 3.2%,

respectively, in 1979. The increase in earnings applicable to common stock was g reater than

- the increase in earnings per share due to the dilutive effect of the increased average number ~

'14 of shares outstanding resulting from the sale of 2,000,000 shares of common stock in June. i

'1979.

n

Deirnarva Power a Light Company and Subsidiary Companies

' Consolidated Statements of income For the years ended December 31 i

(Dollars in Thousands) i 1979 1978 Operating Revenues Electric

$363,666

$318,106 Gas 49,322 49,640 i

Steam 11,711 10,956 424,699 378,702 i

Operating Expenses Operation:

Fuel and energy interchange, net 148.922 122,760 Gas purchased 29,801 31,135 Other operation 67,824 58,603 Maintenance 28,475 25,214 l

Depreciation 33.866 31,383 Taxes on income 23.304 18,858 I

Taxes other than income 17,648 19,186 l

349,840 307,139 l

Operating income

,. 74.859 71,563 Other Income Allowance for other funds used during constructic' 12.,576 7,916 Other, net 94 128 12,670 8,044 l

Income Before Interest Charges 87,529 79,607 i

invest Charges i

Long-term debt 36.399

. 33,506 i

Short-term debt and other 2,166 1,585 l

Allowance for borrowed funds used l

during construction (4,412)

(2,932) 34,153 32,159 Net income 53,376 47,448 Dividends on Preferred Stock 9,050 7,474' I

- $ 44.326

.$ 39,974 Earnings Applicable to Common Stock l

Common Stock Average shares outstanding (thousands) 23,215 21,582 Earnings per share

$1.91

$1.85 j

Dividends declared per share

$1.40W.

$1.30W See accompanying Notes to Consolidated Financial Statements.-

15 a

i Deimarva Power & Light Company and Subsidiary Companies Censolidated Balance Sheets As of December 31 l

(Donars in Thousands)

{

1979 1978 Assets Utility Plant - at original cost Electnc

$ 962,116

$ 912,366 l

Gas 60,960 58,884 Steam 22,447 22,322 i

Common 30.399 18,176 1,075,922 1,011,748 i

Less: accumulated depreciation 300.250 270,756 Net utility p! ant in service 775,672 740,992 Construction work in progress 309.755 252,266 Nuclear fuel, at amortized cost 11,057 8,910 1,096,484 1,002,168 Nonutility Property and Other Investments

_ 712_

4,620 3,

Current Assets Cash 1',,775 16,845 Pollution control funds held by trustee 3,226 1,432 Accounts receivable 39,322 33,637 Deferred fuel costs, net 10,976 (2,290)

Materials and supplies, at average cost:

Fuel (coal, oil and gas) 45,4T.2 23,061-Construction and operation 16,5?4

' t 4,599 Prepayments 3,199 3,013 -

130/ 24 95,297 Deferred Charges Deferred income taxes relating to the credit arising from sale of conscts (note 6) 13,.69 _

9,888 Other -

5 717 8,332 18 986 18,220 TOTAL

$1,249 606

$1,120,305

= = = = =

See accompanying Notes to Consolidated Financial Statements.

l 1-1 L

16 L

1

1979 1_978 Liabilitics Capitalization (see accompanying statements)

Common stock 82.015 73,407 Additional paid-in capital 172,897 150,283 Retained earnings 130.594 119,392 Total common stockholders' equity 385.506 343,082 Preferred stock 125.110 125,175 Long term debt 524,779 468,955 1.035.395 937,212 Current Uabilities Short-term debt 16.950 Current maturity of long-term debt 12.000 10,000 Accounts payable 15.985 13,261 Taxes:

Accrued, net 426 18,284 Deferred (fuel costs) 5.299 (1,270)

Interest accrued 11.166 11,303 Dividends declared 8.996 7,504 Other 3.299 3,477 74.121 62,559 Deferred Credits Credit arising from sale of contracts (note 6) 76,749 77.383 Accumulated deferred income taxes 23.525 15,490 Accumulated deferred investment tax credits 34,927 24,772 Other 4,889 2.889 140.090 120,534 Commitments (note 7) and Contingencies (note 9)

TOTAL

$ 1.249.606 S1,120,305 See accompanying Notes to Consohdated Financial Statements.

17

i-l De!marva Power & Light Company and Subsidiary Companies Consolidated Statement of Sources of Funds For Construction Expenditures l

For the yea *s onded December 31 (Dollars in Thousands)

_._. 1979_

Sources of Funds

__ _ 1_978 Internally generated:

i Net income S 53.376

$ 47,448 Items not requiring (providing) funds:

Depreciation 33.8Gr 31,383 Amortization of nuclear fuel 1,307 ao Allowance for funds used during construction (16.988)

(10,848)

Investment tax credit adjustments, net 10.155 9,701 Deferred income taxes, nel 14;G_0_ -

_(L428)

Funds from operations 95.609 77,563 Less: Dividends on common and preferred stock 42,174 35J63 Internally generated funds

_ 53,435 41,9_30 l

External financing:

Net proceeds from:

Long-term debt.

First Mortgage bcnds 17.678")

49,620 Term loan 50.000 Common stock 31.222 5.084 Preferred stock 19,949 Change in short-term debt 16.950 (32,100)

Redemption of long-term debt

. (.1_0,000)

Externally financed funds 105.850 42,5_5_3_

Other sources (uses):

Decrease (increase) in working capitaF2)

(49.084) 36,962 Other, net

_ _1,8.60 8,857 Other sources (uses)

_(47,224) 45.819 Constructic,.. Expenditures (excluding allowance for funds dunng construction)

$112.061

$_130,272

'" Issued to collaterakze 6 6% Series Po!lution Control Revenue Bonds.

20ther than short term debt, current matunty of long-term debt ~1d current deferred income taxes. Changes primanly relate to fuel and tax accounts.

See accompanying Notes to Consolidated Financial Statements.

i t

18

Delmarva Power & Light Company and Subsidiary Companies Consolidated Statements of Capitalization As of December 31 (Doilars in Thousands) 1979 1978 Common Stockholders

• Equity Common stock. par value $3.375 per share authonzed 35.000.000 shares, outstanding 24.300.758 and 21,750.139. shares 5 82 015

$ 73.407 Additional paid-in capital 172 837 150,283 Retained earnings 130 594 119.392 Total Common Stockholders' Equity 385 506 37%

343.082 36%

Cumulative Preferred Stock Par value $25 per share. 3.000.000 shares authonzed. none outstanding Par value $100 per share, 1.800,000 shares authonzed Without mandatory redemption.

4 00% Senes - outstanding 40.000 shares 4 000 4.000 3.70% Series - outstanding 50.000 shares 5000 5.000 4 28% Senes - outstanding 50 000 shares 5.000 5.000 4.56% Senes - outstanding 50.000 shares 5 000 5,000 4 20% Senes - outstanding 50.000 shares 5000 5.000 5 00% Senes - outstanding 80,000 shares 8.000 8.000 7 84% Series - outstanding 100.000 shares 10 000 10.000 8 96% Senes - outstand ng 130.000 shares 13 00n 13.000 7.52% Senes - outstanding 150.000 shares 15 000 15.000 7.88% Series - outstanding 200.000 shares 20 000 20.000 8 00% Series - outstanding 150.000 shares 15 000 15J00 105 000 105.000 With mandatory redemption:

9 00% Senes - outstanding 200.000 shares 20 000 20.000 125 000 125.000 Premium

_110 175 Total Preferred Stock

_ 125 110 12 %

125,175 13%

Long-Term Debt First Mortgage and Collateral Trust Bonds:

2h% Senes - issued 7/ 7:49, due 7/1/79 10.000 2%% Senes -issued 10 6 50. due 91.80 12.000 12.000 9%% Senes - issued 1/14/75, due 1/1,83 30 000 30.000 3b% Senes - issued 5/11:54, due 5/1,84 10 000 10.000 3b% Senes - issued 12/20.55, due 12/1.85 10.000 10.000 3%% Senes -issued 6'17/58, due 6/1,88 25 000 25.000 4%% Senes - issued 9 22>64, due 10:1,94 25 000 25.000 6b% Senes - issued 913,67, due 9/1/97 25 000 25.000 7 % Senes - isst.ed 10'28 68. due 11/Is98 25 000 25.000 8%% Senes - issued 1/12.70, due 1/1/00 30.000 30,000 8%% Senes -issued 11/30 70, due 1211;00 30.000 30.000 7%% Senes -issued 11/30/71 due 12/1,01 35 000 35.000 1

7h% Series - issued 8/ 3/72, due 8'1.02 30 000 30,000 l

8 % Series -issued 6c27,73 due 7/1;03 25 000 25,000 l

10 % Series -issued 6-13.74, due 6/1<04 33 950 33.950 1

11 % Senes -issued 7/ 2/75, due 7/1,05 29.100 29.100 1

9%% Senes - issued 6 22/78. due 7/1'08 50.000 50,000 6.6% Series -issued 7/ 1/79, due 7/1/04 18;200 443 250 435,050 Pollution Control Notes:

l Senes 1973. 5 9% effective rate. due 1983-1998 8 000 8,000 l

Senes 1976. 7.3% effective rate, due 1992-2006

_ 34 500 34,500

__42 500 42 100 l

Term Loan, due 1984, interest at prime rate

_ 50 000 Unamortized premium and discount on debt, net

_... _ 1_029 1,405 536 779 51 %

478.955 51 %

j Current matunty of tong-term debt

__ (12 000)

(10,000)

Total Long-Term Debt 524.779 468,955 Total Capitalization

$1035 395 100 %

$937,212 1]%

l See accompanying Notes to Consolidated Financial Statements.

19

Deimarva Power & Light Company and Subsidiary Companies Consolidated Statement of Changes in Common Stockholders' Equity For the two years ended December 31,1979 (Dolfars in Thousands)

Par Paid-in Retained Shares Value Capital Earnings Total Balance - January 1,1978 21,358,543

$72,085

$146,521

$107,607

$326,213 Net income 47,448 47,448 Cash dividends declared:

Common stock (28,189)

(28,189)

Preferred stock (7,474)

(7,474)

Issuance of common stock:

Dividend Reinvestment Plan 391,596 1,322 3,762 5,084 Balance - December 31,1978 21,750,139 73,407 150,283 119,392 343,082 Net income 53,376 53,376 Cash dividends declared:

Common stock (33,124)

(33,124)

Preferred stock (9,050)

(9,050)

Issuance of common stock:

Public offering - June 2,000,000 6,750 17,460 24,210 Tax Reduction Act Stock Ownership Plan (TRASOP) 74,557 252 757 1,009 Dividend Reinvestment Plan 476,062 1,606 4,397 6.033 Balance - December 31,1979 24,30_0,758

_$82,015

$172 897

$130,5_94

$385 506 1

1 See accompanying Notes to Consolidated Financial Statements.

20

Dalmarva Power G Light Company and Subsidiary Company Notes to Consolidated Financial Statements Note 1. Significant Financial Statements i

Accounting Policies The consolidated financial statements include the accounts of the company and its subsidiary companies, all of which are totally-held. Accounting policies are in accordance with those prescribed by the regulatory commissions having juris-diction with respect to accounting matters.

Revenues Revenues are billed to customers on a monthly cycle basis and include rate increases permitted to be billed subject to refund pending final approval. At the end of each month, there is an amount of unbilled electric and gas service which has been rendered from the last meter reading to the month-end.

I Fuel Costs Fuel costs (electric and gas) are deferred and charged to operations on the basis of fuel costs included in customer billings under the company's tariffs, which are subject to periodic regulatory review and approval.

The company's share of nuclear fuel costs relating to jointly-owned nuclear generating stations (including estimated costs of storing spent fuel)is charged to fuel expense on a unit of production basis.

Depreciation and Maintenance The annual provision for depreciation is computed on the straight-line basis using composite rates by classes of depreciable property. For the years 1979 and 1978, the annual provisions expressed as a percent of average depreciable utility plant in service were 3.3% and 3.4%, respectively. Provision for decom-missioning costs relating to jointly-owned nuclear generating units is made to the extent of the net cost of removal allowed for rate purposes (approximately 20% of the plant cost).

The cost of maintenance and repairs is charged to operating expenses. A replacement of a unit of property is accounted for as an addition to and a retirement from utility plant. The original cost of the property retired is charged to accumulated depreciation together with the net cost of removal. For income tax purposes, the cost of removing retired property is deducted as an expense.

l Pension Plan The company has a trusteed noncontributory pension plan covering all regular l

employees. Pension contributions were $6,839,000 in 1979 and $6,619,000 in 1978, including $1,236,000 and $1,221,000 charged to construction, respec-tively. The contributions provide for normal cost and amortization of prior service costs over periods of twenty to twenty-five years. At December 31,1979, the prior service costs exceeded the market value of the assets in the retirement fund by approximately $14.800,000. As of the same date, the market value of the fund assets exceeded the actuarially computed value of vested benefits.

Income Taxes Consolidated federal income tax retums have been settled through 1973; the l

returns for 1974 through 1976 are being examined by the Internal Revenue Service.

Deferred income taxes result from timing differences in the recognition of l

certain expenses for tax and financial accounting purposes. The principal items accounting for deferred income taxes are: (1) use of accelerated depreciation methods for income tax purpcoes, (2) unbilled fuel and gas purchased costs deducted currently for income tax purposes, ar. J (3) other timing differences involving spent nuclear fuel storage costs and the capitalization of certain taxes and construction costs.

21

Investnien* tax credits utilized to reduce federalincome tanes are deferred and genera ir amortized over the usefullives of the related utility plant, excluding j

the additio,al 1% TRASOP credit, which does not affect income.

4 Allowanc.- for Funds Used During Construction Allowance for funds used during construction (AFUDC) is a noncash item and is defined in the regulatory system of accounts as "the net cost for the period of construction of borrowed funds used for construction purposes and a reason-able rate cercther funds so used." AFUDC is segregated into two components:

(1) the interest on debt component (" allowance for borrowed funds used during l

construction"), which is net of taxes and classified as a credit to interest charges, i

- and (2) the common stock equity and preferred dividend component ("al-lowance for other funds used during construction"), which is classified as an item of other income. AFUDC is considered a cost of uti!ity plant with a concurrent

. credit to income. It is excluded from taxable income for income tax purposes.

J The rate used in determining AFUDC was 7.7% in 1979 and 7,4% in 1978.

i Also, effective January 1,1979, the company adopted semiannual compound-ing of AFUDC. The effect of these changes increased earnings applicable to common stock for 1979 by $1,736,000 (7c per share).

1 I

j Note 2. Taxes on income

- Income tax expense for 1979 and 1978 is as follows:

l 1979

($000) 1978 l

Operations:

l Current:

Federal

' $(4,457)

$ 6.849 State 1,859 3,736 Deferred, net:

d i

Federal 12,674 (1,105)

State 1,930 (323) investment tax credit adjustments. net 11.298 9.701 i

23,304 18,858 Other income -

346 452 j

_$23 6_50

_$19.310 2

i i

The following is a reconciliation of the difference between income tax-expense and the amount computed by multiplying income before tax by the j.

federal statutory rate:

1979

($000) 1978 Amount Rate Amount Rate Statutory income tax expense

$35,432 '46%.

$32,044 48%

Reduction in taxes resulting from:

Exclusion of AFUDC for income J

tax purposes (7,815) (10)

(5,207)' (8)

Investment tax credits amortized to income'

- (2,646) - (3) -

. (4,196) (6)

Excess of tax depreciation over book depreciation not normalized (2,511) (3)

(3,329) (5)

Other, net 1.190 1

(2) -

Income tax expense

$23,650. 31%

$19.310 - 29%

22

-t-4 w

~

r-e--

The components of deferred income taxes relate to the following tax effects

c. timing differences between book and tax income:

1979

($000) 1978 Depreciation

$ 6,907

$ 5,657 Deferred fuel costs 6.081 (5,254)

Capitatized overhead costs 1,103 162 Nuclear fuel storage costs (1,007)

(1,155)

Pennsylvania gross receipts tax 1.284 (735)

Other, net 236 (103)

_$14 604

$(1,428)

Investment tax credits utilized amounted to $14,000,000 in 1979 (including TRASOP credit of $1,060.000) and $13,900,000 in 1978.

/

j i

Note 3. Taxes Other Than 19~9

($000) 1978 Income Delawarettility.

$ 8,090

$ 7.088 c

Pennsylvania gross receipts tax (2,445)*

1.400 i

Property 5,860 5.113 Other gross receipts 2,560 1,843 l

Social Security 2,332 1.942 4

Franchise and other 1,251 1,800

_$17 6_48

_$19,186 i

• The company had accrued, but not paid, the Pennsylvania gross receipts tax on energy generated within the state but sold outside for the years 1977-1979.

In December 1979, the tax was repealed beginning in 1980, and the company does not now believe that the prior years' taxes will be payable. Accordingly, I

the accruals were reversed in the fourth quarter of 1979, the effect of which was to increase earnings applicable to commca stock for the three and twelve i

months ended December 31,1979 by $1,687,000 (7c per share) and

$1,161,000 (Sc per share), respectively.

i Note 4. Capitalization Common Stock At December 31,1979 there were 1,686,701 chares of common stock reserved for issuance under the Dividend Reinvestment Plan and the TRASOP.

Retained Earnings The current supplemental indenture restricts the amount of consolidated re-tairied earnings available for cash dividend payments on common stock to

$35,000,000 plus accumulations af ter June 30,1978, which available amount at December 31,1979 was approximately $51,000,000.

Preferred Stock (1) The 9% series of preferred st' ck has a sinking fund requirement, com-i o

mencing in December,1984, to redeem 8,000 shares annually at $100 per share. At the option of the company, an additional 8,000 shares may be re-deemed on any sinking fund date, without premium. (2) The series of preferred -

i 23

-a g

,-, + - -,,

y.

9

stock without mandatory redemption may be redeemed at the option of the company at any time, in whole or in part, at the various redemption prices fixed for each series (ranging from $103 to $108 at December 31,1979). (3) The annual preferred dividend requirements on the outstanding preferred stock at December 31,1979 are 59.050,000.

Capital Stock Expenses The additional paid-in capital on common stock and the premiums on preferred stock are stated net of the expenses related to the issuance of such stock.

Long-Term Debt (1) On July 12,1979, the company issued $18,200,000 of 6.6% First Mortgage and Collateral Trust Bonds to collateralize pollution control revenue bonds issued by the Department of Community Affairs and Economic Development of the State of Delaware. The net proceeds of the issue ($17,678,000) were depos-ited in a construction fund held by a trustee and are intermittently aisbursed to reimburse the company for the cost of constructing certain pollution control facilities. (2) In December,1979, the company entered into term loan agree-ments with several banks in borrowing $50,000,000 for a five-year period. The loan may be prepaid at any time without penalty and the interest on the loan will range f rom the prime rate in 1979 to 105% of the prime rate in 1984. (3) Substan-tially all utility plant of the company now cr hereaf ter owned is subjed to the l!en of the related Mortgage and Deed of Trust. (4) The annualinterest requirements on the outstanding indebtedness at December 31,1979 are $44,517,000.

Note 5. Short-term Debt Information regarding short-term borrowings (all commercial pmer) is as and Lines of Credit follows:

1979 1978 Short-term debt outstanding at year-end

$16,950.000 Average rate of interest on debt outstanding at end of period 13.6 %

Average short term debt out-standing during period

$15,100.000

$17,700,000 Average rate of interest on short-term debt outstanding during period 11.5 %

7.2%

Maximum short-term borrowing during period

$53,200,000

$36,000,000 As of January 1,1980, the company had unused bank lines of credit of

$75,750,000. The company is required to pay commitment fees or maintain 10%

compensating balances for these lines.

Note 6. Sale of Contracts The proceeds received by the company for the sale, in 1975, of the contracts for for Nuclear Plant a nuclear steam supply system and related fuel, net of plant expenditures which are considered of no future value to the company, are classified ae a deferred

redit in the balance sheet. It is the intention of the company to reduce the cost of L

subsequent replacement plant capacity by the amount of the net proceeds.

-,Q The company, under advice of counsel, did not treat the sale of these y

n contracts as taxable for federal and state income tax pumoses. Accordingly, the j

tax basis of the company's depreciable property was reduced by approximately l

$77 million in 1976, and the annual tax effect (approximately $4 million per year) of the resulting decrease in tax depreciation is being recorded in a deferred 24 4

income tax account with a corresponding direct credit to current taxes accrued.

If this transaction is ultimately considered taxable, additional taxes payable at December 31,1979 would approximate between $13 million and $24 million (excluding related net interest of $2.8 million to $5.3 million) and would be charged to the deferred tax account.

Note 7. Commitments The company estimates that approximately $98,800,000, excluding AFUDC, will be expended for construction purposes ;n 1980, in connection with which substantial commitments have been incurred. The company also has commit-ments under long-term fuel supply contracts.

Minimum commitments as of December 31,1979 under all noncancelable lease agreements are as follows:

1980

$ 6,743,000 1981 6,411,000 1982 5,977,000 1983 5,308,000 1984 2,190,000 18,678,000 Remainder Total

$45,307,000 The total minimum rental commitments are applicable to the fornwing types of property: company's share of Peach Bottom nuclear fuel, $12,04J,000; fuel storage and pipeline facilities, $26,792,000; railroad coal cars, $3,175,000; other, principally computer equipment, $3,291,000. RenMls charged to operat-ing expenses aggregated $11,516,000 in 1979 and $10,385.PJO in 1978, in-cluding $5,646,000 and $5,460,000 for nuclear fuel, respecnvely.

The aforementioned leases are principally operating leases. Those leases that meet the criteria of capital leases are not accounted for as such in the rate-making process, and, if capitalized, would not have a significant effect on assets, liabilities or expenses.

Note 8. Jointly-Owned in addition to nuclear fuel, utility plant in the accompanying balance sheet as of Utility Plant December 31,1979 includes the company's interest in jointly-owned plant as follows:

($000)

Propor-Accumu-Construction tionate Plant in lated Work in Share Service Depreciation Proaress 6,.

Nuclear:

Peach Bottom 2 and 3 7.51 %

$ 60,518

$11,806

$ 1,996 Salem 1 and 2 7.41 72,804 6,940 49,969 Coal-Fired:

Keystone 3.70 8,029 2,691 90 Conemaugh 3.72 12.202 3.113 134

{

Total

$153,553 E 550_

$52,189 25

The company finances its share of construction of jointly-owned projects. In addition, the company is a joint guarantor of loans ($1,382,000 proportionate share) advanced for operation of the coal mines that supply the Keystone plant.

The company's share of operating expenses of the jointly-owned plant is in-cluded in the corresponding operating expenses in the accompanying state-ments of income.

Note 9. Contingencies See Note 6 for possible payment of income taxes relating to the sale of contracts.

Revenues collected since December 1,1978 of approximately $2.8 million are subject to refund pending FERC approval of an electric resale rate increase for certain wholesala customers.

The company is a defendant in two anti-trust suits filed in 1977 in the U.S.

District Court for Delaware by four Delaware municipal electric wholesale cus-tomers who seek declaratory, injunctive and treble damage relief under the Sherman and Clayton Acts. These actions are in their earliest stages and, until plaintiffs have articulated a theory of damages for their allegations, it is not i

possible to quantify the company's exposure to liability, if any, or to comment on th validity, as a matter of law, of the damage claims. The company believes the suits to be without merit and legal counssi believes the company has material substantive defenses available io it.

The company is involved in certain other legal and administrative proceed-ings before various courts and governmental agencies concerning rates, envi-ronmental issues, taxes, nuclear and other licensing, fuel contracts and other matters. In the opinion of management, the ultimate disposition of these pro-ceedings will not have a material effect on the financial pc J. tion or results of operations of the company.

The Price-Anderson Act places a limit of liability of $560 million on each nuclear generating facility for public liability claims that arise from a nuclear incident. Public liability insurance on the nuclear generating units in which the company has an ownership participation is currently provided by a combination i

of private insurance and indemnity agreements with an agency of the federal.

government, under which the company could be asse:, sed up to a maximum of

$3 million in any one year. For property damage to the Salem and Peach Bottom nuclear plant facilities, the company and its co-owners have private insurance up to $300 million for each station. The company is a self-insurer, to the extent of its ownership interest, for any property loss in excess of the aforementioned amounts.

Note 10. Segment information 1979

($000)

Electric Gas Stearn Total Operating revenues

$ 363,666

$49.322

$11,711 - $ 424,699 Operating expenses:

Depreciation 30,672 2,441 753 33,866 Other 263.491 42,456 10.027 315,974

]

Operating income 69 503..$ 4,425 931

_$ _ 74,859.

As' sets at December 31,1979:

Net utility plant

$ 737,721

- $43,392

$ 5,616

-$ 786,729 Construction work in l

. progress -

307.412 695 1.648-309,755 l

Total utility plant 1,045,133-44,087 7.264 1,096,484 -

l Other identifiable assets '

71,958.

3,927 332 76,217'

~

I

_$1.117,091

$48,014

,$ 7.596 - $1.172,701

- Unallocated assets 76,905 ~

26 Total assets.

$1,249 606

^

m

1978

($000)

Electric Gas Steam Total Operating revenues

$318,106

$49,640

$10,956

$ 378,702 Operating expenses:

Depreciation 28,513 2,118 752 31,383 Other 223,336 43,141 9,279 275,756 Operating Income

$ 66 257

$_4.3_81_

925 71,563 1

Assets at December 31,1978:

Net utility plant

$701,024

$42.886

$ 5,992

$ 749,902 Construction work in progress 250,616 352 1,298 252,266 Total utility plant 951,640 43,238 7,290 1,002,168 Other identifiable assets 36,304 5,206 292 41,802

$987.944

$48.444

$ 7,582

$1,043,970 Unallocated assets 76,335 i

l Total assets

_$1.120 305 Operating income by segments is reoorted in accordance with generally accepted accounting and rate-making practices within the utility industry and, accordingly, includes each segment's proportionate share of taxes on income and general corporate expenses. Construction expenditures in 1979 and 1978 were principally for electric facilities.

I Note 11. Quarterly Financial The quarterly data presented below reflect all adjustments necessary in the Information (Unaudited) opinion of the company for a fair presentation of the interim results. Quarterly data normally vary seasonably with temperature variations, the timing of rate increases and the scheduled downtime and maintenance of electric generating i

units. See Notes 1 and 3 for additional information.

t Earnings Earnings Apphcable Average per i

operating Operating Net to Common shares Average r

Revenue income income stock outstanding share ouarter Ended (000)

(000)

(000)

(000)

(000)

(Dollars) 1978:

March 31

$105,172

$20,494 $14,663 $12 351 21.433

$.60 June 30 84,617 14,929 9,441

/,628 21,530

.35 September 30 96,716 19,773 13,881 12.069 21,627

.56 December 31 92,197 16.367 9,463 7p26 21,736

.34

$378 702

$7L563 $47 4M _$3_9,974 21 582_

_$1.85 1

1979:

March 31

$109,237

$21,091 $15,965 $13,703 21,846

$.63 June 30 94,054 16,052 10.870 8,607 22,632

'.37 September 30 113,916 19,371 14,277 12,015 24,086

.50 December 31 107.492 18,345 12,264 10,001 24,295

.41

$424,699

$74,859 $53,376 $44,326 23 215

$1.91 m

l l

l Note 12. Supplementary The following supplementary financial information, as prescribed by the Finan-Information to Disclose the cial Accounting Standards Board in Statement No. 33,is supplied for the pur-l Effects of Changing Prices pose of providing information about the effects of general inflation on the com-pany's operations. The supplemental information presented herein is on a con-(Unaudited).

stant dollar basis. Constant dollar amounts represent historical costs stated in terms of dollars of equal purchasing power, as measured by the Consumer Price Index fo All Urban Consumers. The company advises readers that the infor-

[

mation should be viewed as an estimate of the approximate effect of inflation, rather than as a precise measure.

27 r

I

~

I Supplementary Financial Data Adjusted for the Effects of General inflation l

For the Year Ended December 31,1979 l

(Thousands of Dollars)

Constant l

Conventional Dollars Historical (Average j

Cost 1979 Dol!ars)

Operating revenues

$424,699

$424.699 Operating expenses:

Operation and maintenance 275,022 275,022 Depreciation 33,866 58,137 Taxes 40,952 40,952 O'.her income - net (12,670)

(12,670)

Interest charges 34,153 34,153 371.323 395,594 Net income

$ 53,376

$_29,105*

Purchasing power gain on net amounts owed during the year 3 63,356 Reduction of utility plant to net recoverable amount (107,380)

Net

_{$ 44,0.24)

• Including the reduction of utility plant to net recoverable amount, net income (loss) on a constant dollar basis would have been ($78,275).

As requi.ed by Statement No. 33, the current year's provision for deprecia-tion on the constant doilar amounts of utility plant was determined by applying the company's depreciation rates to the indexed plant amounts, even though depreciation is limited to recovery of historical costs as fucher discussed below, Other operating expenses were either not required to be adjusted or were not adjusted due to ratemaking considerations.

The company, by holding monetary assets such as cash and receivables, loses purchasing power during periods of inflation because these items can purchase less at a future date. Conversely, by holaing monetary liabilities, primarily long-term debt, payments in the future will be made with dollars having less purchasing power. For 1979 the company's monetary liabilities exceeded monetary assets which resulted in a purchasing power gain on net amounts owed during the year.

The rate regulatory process limits the company to the recovery of the historical cost of plant. Therefore, the excess of the cost of plant stated in terms of constant dollars over the historical cost of plant is not presently recoverable in rates as depreciation and is reflected as a reduction to net recoverable cost.

Based on past practices however, the company believes it will be allowed to earn on the increased cost of its facilities when replacement actually occurs.

Since the gain from_the decline in purchasing power is primarily attributable to long-term debt which has been used to finance utility plant, the reduction of utility plant to net recoverable amount is netted against the purchasing power gain on net amounts owea during the year.

Current cost information will be available in the company's annual report to the Securities and Exchange Commission on Form 10-K.

i r

I 28

Supplementary Five-Year Comparison of Selected Financial Data Adjusted for the Effects of Ceneral inflation (Average 1979 Collars, in Thousands Except Per Share Amounts) iear Ended Decernber 31.

1979 1978 1977 1976 1975 Operating revenues Historical cost dollars

$424,699

$378,702

$337,818

$286,388

$276.026 Constant dollars 424.699 421,340 404,637 365.166 372,258 Earnings per average common share (after dividends on preferred stock and excluding reduction to net recoverable amount)

Historical cost dollars 1.91 Constant dollars

.86 Net assets at year end Historical cost dollars

$490.616 Constant dollars 463,941 Cash dividends declared per common share Historical cost dollars 1.40W $

1.30W $

1.22 1.20 1.20 Constant dollars-1.40W 1.45 1.46 1.53 1.62 Market price per common share at year-end Historical cost dollars

$ 12.63

$ 13.25

$ 14.38

$ 14.13

$ 13.00 Constant do!!ars 11.94 14.20 16.79 17.62 16.99 Average consumer price Index (1967 = 100) 217.4 195.4 181.5 170.5 161.2 l

1 Report of Independent To the Board of Directors and Stockho!ders Certified Public Accountants Delmarva Power & Light Company Wilmington, Delaware We have examined the consolidated balance sheets and statements of capitali-zation of Delmarva Power & Light Company and subsidiary companies as of December 31,1979 and 1978, and the related consolidated statements of income, changes in common stockholders' equity and sources of funds for construction expenditures for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accord-ingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

in our opinion, the financial statements referred to above present fairly the consolidated financial position of Delmarva Power & Light Company and sub-sidiary companies at December 31,1979 and 1978, and the consolidated results i

F of their operations and sources of funds for construction expenditures for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.

COOPERS & LYBRAND 1900 Three Girard Plaza Philadelphia, Pennsylvania February 8,1980 29

Denarva Power C. Light Company and Subsid+ary Companies Consolidated Statistics 10 Years of Review.

1969 - 1979 Electric Revenues (thousands) Residential

$ 115.381

$105,237

$ 97,691

$ 80,416

$ 77,06d Commercial 91,798 82,796 74,641 60,111 58,165 Industrial 98.023 83,972 76,801 64,458 64,141 Other utilities, etc.

53,782 40,840 38,974 34,896 35,60(

Miscellaneous revenues 4.682 5,261 3,461 2,398 4,37 Total electric revenues S 363.666

$318,106

$291,568

$242,279

$239,35 Electric Sales (1.000 kilowatt hours): Residential 1.968.452 1,979,624 1,924,723 1,787,663 1,672,18C Commercial 1,598.299 1.568,600 1,495,796 1,412,259 1,359,67 Industrial 2.624.438 2,418.527 2,277,630 2,260,661 2,142,15 Other utilities, etc..

1.300.611 1,281,498 1,207,941 1,199,155 1,218,78 Total electric sales 7.491.800 7,248,249 6,906,090 6,659 738 6,392,78;;

Electric Customers (end of period): Residential.

242.745 237,925 233,106 230,579 221,78j Commercial 27.998 28,421 29,648 28,345 27,34 Industrial 874 858 921 1,002 92 Other utilities, etc.

478 480 561 550 54 Total electric customers 272.095 267,684 264,236 260,2576 250,59 Gas Revenues (thousands) Residential 25.719

$28,370

$21,829

$18,826

$15,36 Commercial 8 954 10,154 7,133 6.062 4,67 Industrial.

9.884 10,191 6,950 5,984 4,34 Interruptible 3.044 716 169 1,301 1,21:

Other utilities, etc.

1,461 93 49 44 3

Miscellaneous revenues 270 116 103 31 4

Total gas revenues 49.322

$49,640

$36,233

$32,248

$25,67 Gas Sales (milhon cubic feet): Residential 6.423 6.941 6.751 6,956 6,54 Commercial 2.415 2,593 2,439 2.586 2,451 Industrial..

3.388 3,290 2,811 3,264 2,84 Interruptible 1,190 319 81 953 1,07 Other utilities, etc.

546 29 17 20 1

Total gas sales.

13.962 13,172 12,099 13,779 12,90' Gas Customers (end of period): Residential.

67.823 67,550 67,400 68,978 69,41 Commercial 3.712 3,773 3,738 4,154 4,1@

Industrial.

131 163 163 198 1%

Interruptible 16 21 21 21 2

Other utilities, etc.

1 1

1 1

Totalgas customers 71,683 71,508 71,323 73,352 73,82 Refinery Service Electricity delivered,

262,159 270,006 289,049 318,389 297,2@

(1,000 kilowatt-hours)

Steam delivered.

6.378.705 6,016,095 4,888,366 5,301,421 5,517,00' (1.000 pounds) 30

Average Annual Cornpound %

!1974 1973 1972 1971 1970 1969 Rate of Growth I

Electric Revenues 68,730

$ 51,799

$ 43,878

$ 36,198

$30,992

$27,857 15.27 Residential 51,192 37,888 31,810 25,468 21,430 19,333 16.86 Commercial 66,381 41,284 35,962 28,903 24,069 22,483 15.86 Industrial l 32,976 21,518 16,833 12,964 10,175 8,936 19.66 Other utilities, etc.

9,194 5,287 2.857 1,209 530 513 24.75 Miscellaneous revenues f28,473

$157,776

$131,340

$104,742

$87,196

$79,122 16.48 Total electric revenues Electric Sales 97,472 1,629,641 1,463.821 1,380,763 1,280,420 1,151,108 5.51 Residential 03.053 1,360,216 1,227,230 1,099,897 1,009,488 923,064 5.64 Commercial 61,303 2,512,877 2,412.239 2,252,219 2.264,084 2,217,655 1.70 industrial R30,528 1,252,977 1,137,272 1,014,972 885,720 792.151 5.08 Other utilities, etc.

f92,356 6.755,711 6.240,562 5,747,851 5,439,712 5,083,978 3.95 Total electric sales Electric Customers h15,516 208,073 200,595 193,282 187,683 183,458 2.84 Residential 27,132 26,708 25,856 25,139 24,383 24,058 1.53 Commercial

-891 867 869 810 834 815

.70 Industrial 501 506 496 460 375 283 5.38 Other utilities, etc.

244.040 236,154 227,816 219,691 213,275 208,614 2.69 Total electric customers Gas Revenues

$14,298

$13,018

$12,944

$11,948

~ $11.283

$10,708 9.16 Residential 4,201 3,715 3,532 3,126 2,861 2,555 13.36 Commercial 3,726 3,505 3,265 2,998 2,618 2,641 14.11 Industrial 1,532 1,363 1.035 1,153 1,340 1,222 9.56 Interruptible 26 30 25 16 10 7

70.47 Other utilities, etc.

96 22 18 39 225 251 (13.93)

Miscellaneous revenues

$23,879

$21,653

$20.819

$19,280

$18,337

$17,384 10.94 Total gas revenues Gas Sales 6.863 7,134 7,737 7,583 7,406 6,942 (0.77)

Residential i 2,526 2,614 2,696 2,534 2,384 2,097 1.42 Commercial

) 3.215 3,653 3,875 3,797 3,549 3,700 (0.88)

Industrial i 2,257 2,346 2,134 2,708 3,423 3,263 (9.59)

Interruptible 16 23 20 13 8

6 57.00 Other utilities, etc.

14,877 15,770 16,462 16,635 16,770 16,008 -

(1,36)

Total gas sales Gas Customers

!69,525 69,833 69,891-69,604 68,614 68,074 (0.04)

Residential 4,356 4,418 4,407 4,426-4,444 4,423 (1.74)

Commercial i

195 197 195 204 206 103 2.43 Industrial 21-21 21 21 21 19

' (1.70)

Interruptible 1-1 1

1 1

1 Other utilities, etc.

[ 74,09R 74,470 74,515 74,256 73,286 72,620-

. (0.13)

Total gas customers Refinery Service 0.021 341,700 295,236_

272,649 244,614 281.120 l(0.70)

Electricity delivered (1,000 kilowatt-hours)

. 1,000 5,926,000 7,261,000 7,564,000 7,779,000 7,536,000 (1.65) :

Stesm delivered (1,000 pounds) 31 m

Officers Robert D. Weimer James A. Clark, Jr.

Chairman of the Board and Vice President System Operations Chief Executive Officer and Energy Supply Nevius M. Curtis Frank A. Cook President and Chief Operating Officer Vice President. Production H. Ray Landon J. Edwin Hobbs l

Senior Vice President Division Vice President, Soutnern Division William G. Price Harland M. Wakefield, Jr.

Senior Vice President Division Vice President, Northern Division J. Kenneth Wiley Alfred C. Thawley, Jr.

l Senior Vice President Secretary and rreasurer l

Howard E. Cosgrove Charles Marchyshyn Vice President. Finance and Accounting Comptroller and Chief Financial Officer i

Earl D. Krapf l

Vice President. Regulatory Practices l

l l

l l

Board of Directors Werner C. Brown Thomas C. Roe Chairman of the Board of Hercules incorporated Retired, former Chairman of the Board (chemical manufacturer) Wilmington, Delaware of the Company Mrs. Henry P. Cannon,11 Dr. E. Arthur Trabant Director of H. P. Cannon & Son, Inc. (food President of the University of Delaware processing firm) Bridgeville Delaware Newark, Delaware Oscar L. Carey James M. Tunnell, Jr.

President and Director of Larmar Corporation Partner of Morris, Nichols, Arsht & Tunnell, (general real estate and home builders) attorneys, Wilmington, Delaware Salisbury, Maryland Robert D. Weimer Nevius M. Curtis Chairman of the Board and Chief Executive l

Pres l dent and Chief Operating Officer of the Officer of the Company l

Company l

eche Commhtee

)

Irenee du Pont, Jr' Werner C. Brown, Chairman; Nevius M. Curtis:

Director and member of Finance Committee of Irenee du Pont, Jr.; Thomas C. Roe; James M.

E.1. du Pont de Nemours & Company (chemical Tunnell, Jr.; Robert D. Weimer i

manufacturer) Wilmington, Delaware Audit Committee R

Sally V. Hawkins i

Director and President of Delaware Broadcasting - B o' wn-sc I arily l

Company and General Manager of Station WILM (tadio broadcasting). Wilmington, Delaware Nominating Committee i

Dr. Earl C. Jackson, Sr.

Irenee du Pont, Jr., Chairman; Dr. E. Arthur Retired Superintendent of the Wilmington Public Schools, Wilmington, Delaware (Superintendent Emeritus)

William G.' Price Senior Vice President of the Cr ;npany 32 l

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